Famous First Bubbles: The Fundamentals of Early Manias

Front Cover
MIT Press, 2001 - Business & Economics - 163 pages
1 Review

The jargon of economics and finance contains numerous colorful terms for market-asset prices at odds with any reasonable economic explanation. Examples include "bubble," "tulipmania," "chain letter," "Ponzi scheme," "panic," "crash," "herding," and "irrational exuberance." Although such a term suggests that an event is inexplicably crowd-driven, what it really means, claims Peter Garber, is that we have grasped a near-empty explanation rather than expend the effort to understand the event.In this book Garber offers market-fundamental explanations for the three most famous bubbles: the Dutch Tulipmania (1634-1637), the Mississippi Bubble (1719-1720), and the closely connected South Sea Bubble (1720). He focuses most closely on the Tulipmania because it is the event that most modern observers view as clearly crazy. Comparing the pattern of price declines for initially rare eighteenth-century bulbs to that of seventeenth-century bulbs, he concludes that the extremely high prices for rare bulbs and their rapid decline reflects normal pricing behavior. In the cases of the Mississippi and South Sea Bubbles, he describes the asset markets and financial manipulations involved in these episodes and casts them as market fundamentals.

  

What people are saying - Write a review

We haven't found any reviews in the usual places.

Contents

Preface
ix
The Bubble Interpretation
1
The Tulipmania Legend
15
A Political and Economic Background
19
The Traditional Image of Tulipmania
25
Where Does the Tulipmania Legend Come From?
29
Establishment Attitudes toward Futures Markets and Short Selling The Source of the Pamphlets
33
The Bubonic Plague
37
A Preliminary View The Mississippi and South Sea Bubbles
87
John Law and the Fundamentals of the Mississippi and South Sea Bubbles
91
A John Laws Finance Operations
95
A Rehash of Mississippi Market Fundamentals
105
Laws Shadow The South Sea Bubble
109
South Sea Finance Operations
115
Fundamentals of the South Sea Company
121
Conclusion
123

The Broken Tulip
39
The Bulb Market 16341637
43
Some Characterization of the Data
49
PostCollapse Tulip Prices
61
Bulb Prices in Later Centuries
65
Was This Episode a Tulipmania?
75
The Macro Bubbles
85
The Tulipmania in the Popular and Economics Literature
127
The SeventeenthCentury Tulip Price Data
133
Notes
145
References
149
Index
155
Copyright

Common terms and phrases

References to this book

All Book Search results »

About the author (2001)

Peter M. Garber is Global Strategist at Global Markets Research of Deutsche Bank.

Bibliographic information